Repo is the rate at which the RBI lends short-term funds to banks.

“Uncertainty in food prices continue to impinge on headline inflation. Momentum in domestic activities continues to be strong,” RBI Governor Shaktikanta Das said in the briefing.

He emphasised on the necessity for the monetary policy to remain actively dis-inflationary. Five out of the six members voted in favour of the rate decision. The panel also retained the monetary policy stance unchanged at withdrawal of accommodation.

“Global growth is expected to remain steady in 2024, with heterogeneity across regions. Though global trade momentum remains weak, it is exhibiting signs of recovery and is likely to grow faster in 2024. Inflation has softened considerably and is expected to moderate further in 2024,” Das added.

Since the April monetary policy in 2023, the RBI has kept the repo rate unchanged at 6.5 per cent.

During its previous MPC meeting on December 8, the RBI had revised the growth projection for the current fiscal to 7 per cent, up from the earlier estimate of 6.5 per cent while maintaining the repo rate unchanged for the fifth consecutive time.

The MPC is determining the policy repo rate to achieve the inflation target, while it is also considering the goal of fostering an economic growth.

While retail inflation in the current fiscal has decreased since reaching a peak of 7.44 percent in July 2023, it remains elevated, standing at 5.69 percent in December 2023. However, it is within the Reserve Bank’s target range of 4-6 percent, thus staying within the central bank’s comfort zone.

The central bank governor last month, stated that the Indian economy is projected to achieve a growth rate of 7 per cent in the upcoming fiscal, with expectations of further easing in inflation. Das also acknowledged the Centre for the structural reforms it has implemented in recent years, noting that these reforms have enhanced the medium and long-term growth outlook for the Indian economy.

Till now, banks were allowed to offer domestic term deposits (TDs) or fixed deposits (FDs) without a premature withdrawal option, provided that all TDs accepted from individuals for an amount of Rs 15 lakh and below shall have a premature withdrawal facility.

Further, the banks have also been permitted to offer differential rates on interest on TDs based on the non-callability of deposits (i.e., non-availability of premature withdrawal option) in addition to tenure and size of deposits, News18 reported.

“On a review, it has been decided that the minimum amount for offering non-callable TDs may be increased from rupees fifteen lakh to rupees one crore i.e., all domestic term deposits accepted from individuals for amount of rupees one crore and below shall have premature-withdrawal-facility,” the RBI said in a circular dated October 26, 2023.

It said these instructions shall also be applicable for non-resident (external) rupee (NRE) deposits and ordinary non-resident (NRO) deposits.

This circular is applicable to all commercial banks and co-operative banks.

“Banks shall have the freedom to offer NRE / NRO term deposits without premature withdrawal option, provided that all NRE / NRO term deposits accepted from individuals (held singly or jointly) for amount of rupees one crore and below shall have premature-withdrawal-facility,” it said.

Das said the spike in vegetable prices in July is starting to see a correction, led by tomato prices, pointing out that new arrivals are already softening prices. “We expect to see an appreciable slowdown in vegetable inflation from September,” he said, adding that the progress of monsoon in July has upped the prospects for the summer crop.

He also welcomed the “proactive supply management” in the case of onions.

Delivering the Lalit Doshi Memorial Lecture in Mumbai, Das said vegetable price shocks are short-term in nature and the monetary policy can wait for the “dissipation” of the first-round effects of the current spate of shocks. The headline inflation came down to 4.3 per cent in May but has since been rising, and also breached the upper tolerance level of 6 per cent in July because of the jolt from vegetable prices, particularly tomatoes.

“The frequent incidence of recurring food price shocks pose a risk to the anchoring of inflation expectations, which has been underway since September 2022,” Das said and stressed that the RBI will be watchful on this front.

“The role of continued and timely supply side interventions assumes criticality in limiting the severity and duration of such shocks,” he said.